Dealing with debt is difficult enough when you’re not going through divorce. But when you are, sorting through it to determine how to divide it can be overwhelming. And, if handled improperly, you could be responsible for more debt than you realized, such as if your spouse goes on a spending spree without your knowledge.
It is very unlikely that a judge will assign marital debt to only one of the parties, unless you can make clear arguments and offer evidence that supports such a move. Therefore, it is important that you work with an attorney as soon as possible to contain your responsibility for debt incurred during your marriage.
What to Do First
Gather as much information as possible about your debts. Then, consult with an attorney about whether it is wise to pay-off as much debt as possible before filing for divorce. You may have to sell some of your assets but it’s important to know which ones. If you can’t pay it all off by selling other assets, then the judge will determine who must pay the debt and how much each of you must pay. You and your spouse may have:
- Unsecured debt like credit cards, personal loans, lines of credit or loans from family and friends
- Taxes owed on income and property
- Home mortgages, home equity lines or other liens on your real property
- Divorce expense debt
There are certain debts that you must pay no matter what: federal taxes, child support and student-loan debt. Even if a court eventually orders your spouse to pay all the debt for a certain creditor, but the account is in your name, you can still be responsible if your spouse does not pay. If you owe federal taxes, you may be solely responsible for jointly owed taxes if your spouse does not pay.
Methods of Paying Off Debt
It is best to get as much debt as possible out of your name. If your spouse is willing to take responsibility for his or her own debts, transfer those credit card balances to a new card in your spouse’s name only. Then, pay off the balance on the jointly-held card and close it. One of you can also take out an individual, debt-consolidation loan to pay off your own, but jointly-held, debt.
Determining How Much You Owe
We will evaluate the kind of debt you have and help you reduce your exposure to liability for paying off debts that aren’t yours. It may be necessary to hire experts who are able to trace the origin of the debt or liability back to your spouse. Perhaps, your spouse has a gambling addiction and secretly opened credit cards in your name, maxed out the available cash advances and lost the cash gambling. You may not even be aware of it.
For example, a forensic accountant would be able to trace the cash withdrawals and charges backwards to link the unscrupulous spouse to the debt, and not you. We would present this evidence to the judge and request that this debt be assigned exclusively to your spouse.
The Effect of Filing Bankruptcy
A bankruptcy by either one of you can affect your liability for outstanding debt too, even if your spouse is supposed to pay a certain creditor. If a spouse files for bankruptcy before, during or after a divorce, the creditors will look to you for payment of joint debt, regardless of what the divorce decree says. If you are considering filing for bankruptcy, consult with your attorney first.
Contact a Lawyer to Discuss Dividing Debt in Your Divorce
If you would like to discuss dividing your debt during divorce, call an experienced Texas family lawyer. You can learn about your options and how to best protect yourself throughout the process.